Lloyds Banking Group has postponed plans to sell its next giant Irish residential-focused non-performing loan (NPL) portfolio until the end of the year at the earliest, as the bank awaits deeper clarity over lenders’ repossession rights over residential properties, CoStar News understands.
Project Porter, a granular Irish-only residential investment portfolio with an unpaid outstanding loan balance of around €2bn, was lined up by Lloyds as the successor NPL to Project Thames, which traded to Cerberus one month ago for £325m.
However, Lloyds is understood to be seeking further clarity to emerge over an effectively re-written repossession procedure since a High Court ruling by Judge Ms Justice Elizabeth Dunne in July 2011, which decreed that a 1964 law allowing lenders to apply for repossession of residential mortgaged properties in arrears could no longer be used in legal proceedings against borrowers after December 1, 2009.
Ms Justice Dunne ruled that a lending institution cannot apply for an order for possession where a mortgage was created before 1 December 2009, but the demand for full payment was not made until after that date.
In the subsequent nearly two years, the ruling has created a legal loophole over home repossessions, with Bank of Ireland stating back in March that its property rights were being interfered with.
BOI Mortgage Bank claimed if Ms Justice Dunne’s interpretation of the 2009 mortgage law is upheld, then the property rights of secured lenders were interfered with in an “arbitrary and capricious” manner that is unconstitutional, reported Irish Independent in March.
For Lloyds and prospective loan buyers, the greater certainty that the new loan owner will have in repayment from underlying mortgage owners, the easier an Irish residential NPL will be to price.
Additionally, Ireland’s residential market is considered to have not yet bottomed out.
While transactional activity has picked up considerably in Ireland over the last 18 months, particularly in the capital’s office market, leading to a modest improvement in values for the prime Dublin stock, the consensus view appears to be that the residential market is at least six to nine months behind the commercial sector.
The launch of the Lloyds residential NPL sales process, therefore, is not likely to come before Christmas or early in the New Year, at the earliest.
Lloyds declined to comment.